In today’s briefing:
- HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping
- FTSE EPRA Nareit Index Rebalance: Two Adds for Japan
- Giordano (709 HK): Minimal Acceptance As Webb Ups Stake
- Leapmotor IPO – Index Inclusion Timeline
- Kyocera (6971 JP) Founder Kazuo Inamori Passes – Implications for Holdings
- Berkshire BYD’s Selldown Likely to Follow Its PetroChina Playbook
- FTSE China A50 Index Rebalance: Three Changes Upcoming
- FTSE China 50 Index Rebalance: Yankuang Energy (1171) To Replace Shenzhou Intl (2313)
- Doosan Enerbility: Post-Block Deal Trading
- (Mostly) Asia M&A: August 2022 Roundup
HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping
- The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
- The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
- The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).
FTSE EPRA Nareit Index Rebalance: Two Adds for Japan
- Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
- Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
- Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.
Giordano (709 HK): Minimal Acceptance As Webb Ups Stake
- The Cheng-family Offer for Giordano International (709 HK) became open to tendering after the Composite Doc was issued on the 15 August.
- With the first close less than a week away, acceptances are minimal – ~3.6%.
- Separately, David Webb, who definitely will not be tendering, has increased his stake to 5.79%.
Leapmotor IPO – Index Inclusion Timeline
- Leapmotor (2007699D HK) is said to be looking to raise between US$1bn-US$1.5bn by selling 290.9m shares in its IPO. At the top end, the company will be valued at HK$53bn.
- The performance of its peers over the last year leaves a lot to be desired and could lead to lower demand in the IPO.
- Leapmotor (2007699D HK) should be added to the HSCI and the Hang Seng Tech Index, though timing depends on when the stock lists on the HKEX (388 HK).
Kyocera (6971 JP) Founder Kazuo Inamori Passes – Implications for Holdings
- Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
- In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now.
- Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.
Berkshire BYD’s Selldown Likely to Follow Its PetroChina Playbook
- BYD (1211 HK)’s shares declined by -8% on disclosure that Berkshire Hathaway Inc Cl B (BRK/B US) trimmed its stake from 20.04% to 19.92% of outstanding H Shares.
- Berkshire will likely follow its PetroChina (857 HK) playbook and materially sell down over the next few months. Buffet stated that the PetroChina exit was “a decision based on valuation.”
- Berkshire will apply the same investment discipline to the BYD stake. While the shares are trading at a discount to historical multiples, the Berkshire stake is an overhang.
FTSE China A50 Index Rebalance: Three Changes Upcoming
- EVE Energy (300014 CH), PetroChina (601857 CH) and Shaanxi Coal (601225 CH) replace Anhui Conch (600585 CH), CPIC (601601 CH) and Zhangzhou Pientzehuang (600436 CH) at the close 16 September.
- Estimated one-way index turnover at the rebalance is 3.1% and will result in a one-way trade of CNY 1,678m.
- PetroChina (601857 CH) is also an inclusion to the FTSE All-World Index while China Pacific Insurance (2601 HK) is a delete from the Hang Seng China Enterprises Index (HSCEI INDEX).
FTSE China 50 Index Rebalance: Yankuang Energy (1171) To Replace Shenzhou Intl (2313)
- Yankuang Energy Group (1171 HK) will replace Shenzhou Intl Group Holdings (2313 HK) in the FTSE China 50 Index at the close on 16 September.
- Passive trackers will need to buy over 1 day of ADV on Yankuang Energy Group (1171 HK) while selling over 1 days ADV on Shenzhou Intl Group Holdings (2313 HK).
- Short interest on Yankuang Energy Group (1171 HK) is over 10 days of ADV to cover and around 10% of float. That could help the stock move higher.
Doosan Enerbility: Post-Block Deal Trading
- The deal size amounts to ₩572B at a volume of 28.54M shares. The per-share disposal price is ₩20,050, a 7.6% discount from the previous day’s closing price, ₩21,700.
- Enerbility can be a timely LONG target of pension-driven flow in the context where the NPS is seen actively doing portfolio rebalancing lately.
- The volume digested by wall crossing seems quite small, as suggested by yesterday’s short selling volume, the flow volatility range is highly likely to be concentrated in one direction.
(Mostly) Asia M&A: August 2022 Roundup
- For the month of August, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$8.5bn.
- The average premium for the new deals announced (or first discussed) in August was ~41%, and a year-to-date average of 38%.
- This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.
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